White House Demands Revenues in Next Steps of Deficit Battle

August 1, 2011 at 12:00 AM EST

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The debt-ceiling deal hammered out by President Obama and congressional leaders over the weekend passed the House late Monday and is set for a Senate vote midday on Tuesday. Judy Woodruff discusses the deal and the ongoing debate in Washington with Jack Lew, director of the White House's Office of Management and Budget.

TRANSCRIPT

JUDY WOODRUFF: Congress headed today toward votes on a long-sought agreement to prevent a national default. It called for reducing deficits and raising the national debt ceiling by more than $2 trillion over 10 years.

The final acts in the long-running debt and deficit drama played out this afternoon, first in the House.

REP. VIRGINIA FOXX, R-N.C.: The direction is historic. We’re going from seeing how much money we can spend to how much can we cut.

REP. ELIOT ENGEL, D-N.Y.: This bill to me is a pig in a poke. And I’m not willing to buy a pig in a poke.

JEFFREY BROWN: Leaders on both sides had spent the day lining up support. Vice President Biden traveled to the Capitol to explain the agreement to wary Democrats.

VICE PRESIDENT JOSEPH BIDEN: They expressed all their frustration, which I would be frustrated if I were sitting there as well, that we’re going to be — we came — we’re taken down to the wire like this.

And so what they want to know is, they asked questions specifically about the proposed legislation — excuse me — I’m sorry — the proposed legislation. I thought it was a good meeting. And I feel confident that — that this will pass.

JEFFREY BROWN: And House Republicans held a similar session behind closed doors.

Majority Leader Eric Cantor spoke afterward.

REP. ERIC CANTOR, R-Va. House majority leader: Now, I have said the bill is not perfect. And it’s not. But changing the way that Washington spends taxpayer dollars is often a lot like redirecting or turning an aircraft carrier. It’s a monumental task.

JEFFREY BROWN: The 10-year agreement would unfold in two stages. The first would cut spending at federal agencies by about $900 billion.

The debt ceiling would be raised immediately by a similar amount, allowing the government to continue borrowing into 2012. In stage two, a joint congressional committee would recommend $1.5 trillion in additional savings to be enacted by year’s end. Otherwise, automatic spending cuts of $1.2 trillion would kick in, taken equally from domestic and defense programs.

Medicaid and Social Security would be exempted, but payments to Medicare providers could be affected. Either way, the debt ceiling would be increased again by at least $1.2 trillion also by year’s end.

It could be blocked, but only by a two-thirds vote of Congress. After some uncertainty over which chamber would act first, the House took the lead. The measure drew support from Republicans and Democrats.

REP. TIM GRIFFIN, R-Ark.: If this were the only step ever in dealing with the debt, I would vote no. But it’s not. It’s only the beginning.

We didn’t get in this mess with one bill or one piece of legislation. It took a long time and a lot of votes, and it’s going to take a long time and a lot of battles to get out of it. And this is a good first step.

REP. GERRY CONNOLLY, D-Va.: There’s plenty for members of both parties to find objectionable, and they might be right. But the choice before us is not that between this proposal and some platonic ideal. It is between this proposal and catastrophic default tomorrow.

JEFFREY BROWN: The Senate’s top Democrat, Majority Leader Harry Reid, pressed his chamber to line up behind the bill as well.

SEN. HARRY REID, D-Nev. majority leader: Listen, I’m a longtime member of Congress. And I never count my votes until they’re cast. So, I’m hopeful, but we will have to see. The Republicans are going to have to produce some votes and we’re going to have produce some votes. But I’m not here to declare victory. We have to get this thing passed.

JEFFREY BROWN: The deadline to stave off a federal default is midnight tomorrow night.

JUDY WOODRUFF: Now we get three views about the deal at hand and the debate surrounding it.

First: the president’s defense of it as seen by Jack Lew, the director of the Office of Management and Budget. I spoke with him a short time ago.

Jack Lew, the president’s budget director, thank you very much for talking with us.

JACK LEW, White House Budget director: Good to be with you Judy.

JUDY WOODRUFF: On this debt deal moving its way through the Congress, let’s start with what the conservative Republicans are saying. They are saying that this is nowhere near enough to tackle the 14-plus-trillion-dollar debt that this country faces, that it’s just basically a drop in the bucket.

JACK LEW: Well, I think it’s clear. The president made clear last night that he wanted to do more.

He wanted to have an agreement that would have had the kind of long-term structural changes in both tax policy and in entitlement policy to really address the problem for the next 10, 15, 20 years.

What we have is not quite that, but it’s substantially more than a drop in the bucket. It’s very, very tough restrictions on spending on both defense and non-defense over the next 10 years. And it sets up a process where Congress will form a special joint committee that will have the power to make decisions quickly and to move through Congress on an expedited basis another very substantial deficit reduction package.

So, at the front end, there’s almost a trillion dollars. And the second stage is directed to be $1.5 trillion. So, $2.5 trillion is a substantial, substantial step.

Now, in back of the process, they have put in place an enforcement mechanism, so that if Congress fails to act, there will be automatic spending cuts put in place on — 50 percent on defense, 50 percent on non-defense. So, that’s a pretty strong incentive for the committee to act.

JUDY WOODRUFF: Well, meanwhile, the Republican leadership is crowing about what they got, the House speaker, John Boehner, saying he feels very good about it, saying it’s very unlikely there would be any tax increases, which is something the president had said he wanted.

The Senate — or, rather, the House majority leader, Eric Cantor, says there’s no way the House would support tax increases. So, are tax increases off the table?

JACK LEW: Quite the contrary, Judy.

In every conversation that we have had, whether it’s been the president and the leaders or the negotiations with the vice president, or as our economic team engaged with the Congress, every step of the way, we have been clear a long-term solution requires that everything be on the table.

There will not be that kind of consensus behind long-term entitlement reform unless you also have a commitment to long-term tax reform, so that we don’t have a system where you’re asking senior citizens and students to pay the full price and you’re letting people who are at the highest income levels not be part of the solution.

JUDY WOODRUFF: So, Jack Lew, if something comes out of this supercommittee later this year that doesn’t include tax increases, the president will veto it?

JACK LEW: I think that what’s clear is there will be three Democrats and three Republicans from the House and the Senate, so a total of 12 members of Congress evenly divided, charged with looking at this, with the understanding that they need to bring something back that can pass the House and the Senate be signed into law.

There are a lot of different paths they could take. I’m describing what it would take to get the kind of long-term structural changes done. That would require balance. This package has a piece of what is a big solution. It has the piece that affects the annual spending on defense and non-defense programs. The next step is harder, and it will require balance.

JUDY WOODRUFF: And, at this point, you’re — well, are you able to say the president would veto something without tax increases?

JACK LEW: I don’t want to speculate on the work of the committee before the Congress even passes the bill. But I think I have made clear what would be required for a balanced package to be put together.

JUDY WOODRUFF: Well, let me move now to the criticism from the left which I know you’re hearing, just as fierce. They’re saying the president and the Democrats just gave up and let the Republicans, frankly, get most of what they wanted.

JACK LEW: Well, this has been a tough negotiation.

But we should start with kind of first principles. The president said very clearly that we need to address deficit reduction while we need to increase the debt limit. These issues should never have been connected the way they were, so that there was a threat of default facing the country.

But the president believes deeply that we need to do serious things to reduce spending and to reduce the deficit. And he thinks that taxes should be part of a whole solution. I think the notion that this is the whole solution is — is — it’s not. It’s the first step. It’s a down payment.

The discretionary spending levels that were provided for in this legislation are tough, but they are belt-tightening. They would require choices to be made, but they don’t devastate programs the way the levels that passed the Republican House would. It’s a huge difference.

JUDY WOODRUFF: Well, if that’s the case, why are progressive groups — and I just read some quotes from a couple of them a moment ago — saying — quote — “This is an attack on middle-class families. It asks nothing of the rich. It will reduce jobs in the middle class. And it lines up Social Security, Medicare and Medicaid for cuts.”

JACK LEW: So, let me address those maybe in order.

There’s nothing in this legislation that singles out middle-class families. In fact, you look at something like education, we have built in a protection for education funding, so that the need to fund Pell Grants won’t be competing against other things the way it otherwise would.

We have built in a firewall so that defense and non-defense levels are clearly set. It is belt-tightening. It is a tough thing to take a freeze and then go a little bit lower. But it’s almost $30 billion more room than is in the Republican budget.

And that will give us the ability to write bills that we will have a fight with Congress on priorities. But there’s what to argue over, because we have agreed on spending levels. We’re now arguing about priorities. You asked the question about revenues. We believe strongly that revenues should be part of the whole solution. This is the first step. It is not the whole solution.

JUDY WOODRUFF: And the point, Jack Lew, that the White House ended up fighting this battle on Republican turf, even though Democrats control the White House and the Senate, that it ended up really being fought on the House Republican turf?

JACK LEW: Look, there’s no doubt that the willingness to threaten the default of the United States, undermining the full faith and credit and probably sending our economy into a tailspin, was something that was a meaningful risk.

We think it was irresponsible that there are a large number of members of the other party that were willing to do that. Thankfully, the responsible leaders on the other side understood that wasn’t a place to go. And we were able to negotiate a compromise.

JUDY WOODRUFF: Finally, another comment from one of your friends — and that’s the minority whip in the House of Representatives, Steny Hoyer, a Democrat — he said that he, the president, should have offered the bipartisan Bowles-Simpson budget alternative much sooner, in essence, that time was wasted and that that — that a lot of this could have been avoided if the president had done that.

JACK LEW: I think the president has shown through his engagement over these last months an enormous willingness to both lead and to negotiate.

We got very close to an agreement, a bipartisan agreement, between the president and the speaker. It’s something of a tragedy that, while the president was willing to go to the finish line, ultimately, the speaker couldn’t.

I hope that we get back on the track to talking about the kind of balanced policy where we can have that kind of bipartisan agreement. It would be the right thing to do. It’s what the American people are asking us to do.

JUDY WOODRUFF: Jack Lew, the director of the Office of Management and Budget, it’s good to see you. Thank you.

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